Oil down slightly after earlier sharp fall on weak demand

"We believe that the current drop in oil values is to be short-lived and that outright prices will recover in the weeks and months to come, primarily on the back of increased Chinese buying and the end of refinery maintenance season," JBC Energy said.

By PABLO GORONDI
The Associated Press

4/16/2013

By early afternoon in Europe, benchmark oil for May delivery was down 14 cents to $88.57 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session it fell as low as $86.06 a barrel.

On Monday, the contract had dropped $2.58, or 2.8 percent, to finish at $88.71 a barrel.

Crude has dropped nearly 10 percent this month on concerns that the global economy may be slowing and that supplies remain ample.

The Chinese government on Monday said growth in the world's second-largest economy slowed to 7.7 percent in the first quarter from 7.9 percent in the final quarter of last year. Growth was expected to accelerate slightly to 8 percent. Analysts have warned that China's recovery from its deepest slump since the 2008 global crisis is weak.

That slowdown, combined with weak U.S. employment and manufacturing, suggests that demand won't be strong enough to absorb the ample supplies on the world market.

"This isn't a fall just because the global economy is shifting down, this is about a world that has enough oil," said Carl Larry of Oil Outlooks and Opinions in a market commentary.

Analysts at JBC Energy in Vienna said the large slide in oil prices over the past days was "difficult to justify on fundamental grounds," and was due in part to a general slump in commodity prices — the price of gold fell 9 percent on Monday.

"We believe that the current drop in oil values is to be short-lived and that outright prices will recover in the weeks and months to come, primarily on the back of increased Chinese buying and the end of refinery maintenance season," JBC Energy said.

Expectations of positive news due for release later Tuesday on the number of new homes being built in the United States and industrial production helped oil prices erase most of their losses on Tuesday.

Brent crude, which is used to price oil used by many U.S. refiners to make gasoline, was down 42 cents to $100.21 a barrel on the ICE Futures exchange in London. Earlier in the session Brent fell below $100 a barrel for the first time since July.